The Regulation of Fuel Economy and The Demand for Light Trucks

The Regulation of Fuel Economy and The Demand for Light Trucks
Abstract:
The Corporate Average Fuel Economy Standard mandates fleet-average milesper-gallon minimums for passenger vehicles sold in the United States. Among other things, the standard is intended to induce consumers to substitute small cars for large cars. While the standard has reduced the average weight of cars, it has also stimulated the demand for an increasingly popular class of vehicles known as light trucks. The substitution to light trucks has mitigated, but not eliminated, the deleterious effects of the standard on vehicle safety. The effect of the standard on car weights and light-truck sales provides an opportunity to observe a novel manifestation of Sam Peltzman’s ‘‘offsetting-behavior’’ hypothesis. That effect and others are analyzed here in the context of the political economy of the Corporate Average Fuel Economy Standard.

Notable Quotables
“Such studies may overstate the effect of CAFE on safety not because those studies are wrong about the relationships between CAFE, car weight, and car safety but because they ignore the switch by consumers to an increasingly popular class of vehicles known as light trucks. Since the imposition of CAFE, the share of passenger vehicles accounted for by light trucks has doubled and is now approximately 40 percent. The data analyzed here indicate that CAFE has played a substantial role in that increasing popularity.”
“By these estimates, approximately one-half of the increase in the light-truck share between 1975 and 1995 is attributable to CAFÉ.”
Key difference: This fella is attributing the surge in truck sales to consumers preference for safety. CAFÉ made cars smaller to meet standards and small cars are less safe. He says CAFÉ is motivated by protectionism to stop car dealers from importing efficient foreign cars to meet CAFÉ.

Relevence: high

Method: ARMA

Available online: http://www.journals.uchicago.edu/doi/pdf/10.1086/467381